High-grade primary active on deals from Exxon, PepsiCo, Progressive, Verizon; bonds mixed

By Cristal Cody

Tupelo, Miss., March 17 – High-grade supply surged on Tuesday as the financial markets stabilized after more than a week of slides due to concerns over the coronavirus impact.

Bank of America Corp., Consumers Energy Co., Dominion Energy, Inc., Entergy Corp., Exxon Mobil Corp., Oncor Electric Delivery Co. LLC, PepsiCo. Inc., Progressive Corp., Union Electric Co. and Verizon Communications Inc. offered notes.

Progressive priced $1 billion of senior notes in two tranches.

Dominion Energy brought $750 million of senior notes in two parts to the primary market.

Consumers Energy priced an upsized $575 million of first mortgage bonds due Aug. 1, 2051.

Union Electric sold $465 million of 10-year first mortgage bonds.

Bank of America marketed notes due March 20, 2051 with initial price talk in the Treasuries plus 275 basis points area.

Bank of America also offered Canadian dollar-denominated registered medium-term fixed-to-floating-rate senior notes during the session.

Entergy marketed a two-part offering of senior notes that includes five-year notes talked to price at the Treasuries plus 275 bps area and 10-year notes with price talk in the 287.5 bps area.

Exxon Mobil was on deck with five tranches of notes.

The deal included five-, seven-, 10-, 20- and 30-year notes. The five-year tranche is talked to price at the Treasuries plus 235 bps area, the seven-year notes are talked at the 240 bps area, the 10-year tranche is guided to print in the 250 bps spread area, the 20-year notes are talked to price at a 260 bps spread area and the 30-year tranche is talked to print at the 275 bps over Treasuries area.

Oncor marketed a two-part offering of 10- and 30-year notes. Initial price talk on the 10-year tranche is in the Treasuries plus 190 bps area, while the 30-year notes are talked in the 215 bps spread area.

PepsiCo was offering six tranches of senior notes in the primary market on Tuesday.

The deal includes five-year notes talked to price at the Treasuries plus 190 bps area, seven-year notes talked at the 195 bps spread area, 10-year notes talked at the 195 bps area, 20-year notes guided at the 205 bps spread area, 30-year notes talked at the 215 bps spread area and 40-year notes with initial talk in the 245 bps over Treasuries area.

Also, Verizon planned a three-part offering of notes that includes seven-, 10- and 30-year tranches.

The seven-year notes are talked to price in the Treasuries plus 230 bps area, while the 10-year notes are talked at the 240 bps area and the 30-year tranche is guided to price at the Treasuries plus 270 bps area.

Investment-grade credit spreads eased less than 3 bps to end the session.

The Markit CDX North American Investment Grade 33 index softened to a spread of 124.21 bps from 121.73 bps on Monday.

Stocks were mixed over the morning but closed better on the day. The S&P 500 ended up 6%, while the Dow Jones industrial average improved 5.2%.

Treasuries mostly declined as risk-off appetite faded moderately with the 10-year benchmark note yield up 4 bps at 0.77% over the morning and up 26.9 bps on the day at 0.997%.

On Monday, the White House recommended for Americans to gather in groups of no more than 10 and to work from home if possible for the next 15 days.

The recommendation followed the Federal Reserve’s emergency rate cut of 100 bps on Sunday to lower the federal funds target range to 0% to 0.25% to help bolster the economy.

The Fed will purchase $500 billion of Treasuries and $200 billion in agency mortgage-backed securities.

On Tuesday, the Fed announced it will establish a commercial paper funding facility that will provide a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle that will purchase unsecured and asset-backed commercial paper rated A1/P1 directly from eligible companies.

“By eliminating much of the risk that eligible issuers will not be able to repay investors by rolling over their maturing commercial paper obligations, this facility should encourage investors to once again engage in term lending in the commercial paper market,” the Fed release said.

Businesses across the nation are closing or limiting contact with customers to help slow the coronavirus.

U.S. schools are widely closed with an estimated 30 million-plus children now at home.

The bond offerings on Tuesday mark the first deal issuance seen this week.

Just over $7 billion of investment-grade paper priced last week.

Meanwhile, Friday saw a $10.8 billion outflow from high-grade bond funds and ETFs in the largest outflow on record, according to a BofA Securities note released on Tuesday.

The outflow was “driven in part by last week's off-the-chart 7% decline in bond prices as flows tend to follow returns,” the note said.

In the secondary market on Tuesday, bonds were mixed, a source said.

Boeing Co.’s senior notes (A3/A-/) were mostly flat during the session.

Bank and financial paper continued to mostly widen, while energy bonds were seen unchanged to modestly tighter on the day.

Progressive prices $1 billion

Progressive priced $1 billion of senior notes (A2/A/A) in two parts on Tuesday, according to a market source and an FWP filing with the Securities and Exchange Commission.

The company sold $500 million of 3.2% 10-year notes at par to yield a spread of 225 bps over Treasuries.

Initial price talk was in the Treasuries plus 250 bps area.

A $500 million tranche of 3.95% 30-year notes priced at 99.148% to yield 3.999% and with a Treasuries plus 245 bps spread.

The 30-year notes were guided to print in the 262.5 bps spread area.

BofA Securities, Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC were the bookrunners.

Progressive is an insurance company based in Mayfield Village, Ohio.

Dominion Energy sells two tranches

Dominion Energy priced $750 million of senior notes (Baa2/BBB/BBB+) in two tranches on Tuesday, according to a market source and an FWP filing.

A $400 million tranche of 3.3% five-year notes priced at 99.841 to yield 3.335%, or a spread of 265 bps over Treasuries.

Initial guidance was in the Treasuries plus 262.5 bps to 275 bps area.

The company sold $350 million of 3.6% seven-year notes at 99.572 to yield 3.67%. The notes priced on top of guidance at a Treasuries plus 275 bps spread.

Bookrunners were Barclays, BNP Paribas Securities Corp., Credit Suisse and Wells Fargo Securities LLC.

Dominion Energy is a Richmond, Va.-based natural gas and electricity company.

Consumers Energy upsizes

Consumers Energy priced an upsized $575 million of 3.5% first mortgage bonds due Aug. 1, 2051 (Aa3/A/A+) at a spread of Treasuries plus 200 bps on Tuesday, according to a market source and an FWP filing.

Initial price talk was in the 215 bps spread area.

The deal was upsized from $400 million.

The bonds priced at 99.606 to yield 3.521%.

Barclays, Citigroup Global Markets Inc., J.P. Morgan, MUFG, SunTrust Robinson Humphrey Inc. and U.S. Bancorp Investments Inc. were the bookrunners.

Consumers Energy is an electric and gas utility based in Jackson, Miss.

Union Electric prices $465 million

Union Electric placed $465 million of 2.95% 10-year first mortgage bonds at 99.914 to yield 2.96%, or a spread of 200 bps over Treasuries on Tuesday, according to a market source and an FWP filing.

The bonds (A2/A/) priced on top of talk in the Treasuries plus 200 bps area.

MUFG, TD Securities (USA) LLC, U.S. Bancorp and Fifth Third Securities, Inc. were the bookrunners.

Union Electric, doing business as Ameren Missouri, is a subsidiary of St. Louis-based electric and natural gas company Ameren Corp.

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